HMRC internal manual

Inheritance Tax Manual

Overview of agricultural relief Information sources

Whatever the occasion of charge, you should review all the information that is available to you. The list below includes your main sources of information and gives a basic example of one the many areas you may consider investigating on each:-

  • Deceased’s/transferor’s stated occupation on page 1 of the IHT400 or IHT100. Where the deceased/transferor is described as ‘retired’, this may help when investigating whether or not their residence is a “farmhouse”, (IHTM24036), or is occupied for the purposes of agriculture (IHTM24091). Whether or not a person may correctly be described as ‘retired’ should be based on the consideration of all relevant facts.
  • Information provided on form IHT414 (IHTM24255) or D37 (IHTM24256). This includes factual information, such as the date the deceased/transferor acquired the property as well as descriptive information on the nature of the agricultural operations that took place at the property.
  • Information about the deceased’s or transferor’s business activities. This may include any accounts. Was the deceased actively engaged in farming? Do the business accounts show sales or purchases of livestock and or crops, or did the ‘business’ consist solely of renting land to a tenant farmer for their own business? If the land was rented out, business relief (IHTM25131) would not be available on any excess value (IHTM24151) the land has over its agricultural value (IHTM24150)
  • Information given in any professional valuation of the land provided by the taxpayer. This may contain useful information about any tenancies (IHTM24210) granted over agricultural land, or about the nature of the occupation (IHTM24090) of any farm cottages (IHTM24092) and buildings (IHTM24093). A derelict outbuilding is unlikely to have been occupied for the purposes of agriculture (IHTM24060)
  • Tenancy/licence agreements. If the land was let on a grazing licence (IHTM24073) the terms of the licence should indicate if the tenant or the deceased/transferor was responsible for the general upkeep of the land.
  • The terms of any partnership agreement that may exist. The partnership agreement may provide evidence as to the ownership of land farmed by a partnership. If land has an excess value over its agricultural value (IHTM24151) business relief (IHTM25131) may be due at 100% on that excess value for land owned by the partnership, but, if available, it will only be due at 50% if the land was owned by the deceased (IHTM24100).
  • Information in other HMRC files such as Income Tax or company files, Again, these may provide details regarding the extent to which the deceased was actively engaged in farming. (IHTM24253)
  • Other IHT files for the taxpayer, for example a lifetime file or for other members of the family/ business. These can be useful in providing background information regarding the history of the agricultural operations undertaken on the property.

If the deceased is shown as a sole trader or a partner in a farming business but no business interest has been included in form IHT400 you should find out precisely what farming activities were being carried out on the land for the two years before the date of death and by whom. You should deal with lifetime transfers in a similar way. Where the deduction for relief relates to a potentially exempt transfer, you will need to consider the additional conditions that apply (IHTM24172).